Shops shelve online tax hope

It was on top of their Christmas wish list but Australian retailers should not be surprised that the government has refused to play Santa and cut the tax-free threshold for goods purchased overseas.

The Productivity Commission’s report into retail, released on Friday, confirmed what many in the industry already knew – the present tax regime is here to stay.

With more Australians than ever expected to click on a mouse rather than head to the shops this weekend, online competition is the No. 1 worry for an industry in crisis.

The government, under pressure to be seen to be doing something to help the nation’s retailers, has established a taskforce to look at how low-value parcels are processed.

With any findings six months away, it is hardly a lifeline for an industry that faces one of its more dire Christmas trading periods in years.

The four major banks’ surprise decision this week to pass on the Reserve Bank’s full rate cut of 0.25 of a percentage point offers some relief, but this has been overshadowed by the bad news hounding the industry.

Clothing retailer Fletcher Jones was placed in administration on Wednesday, and a public stoush erupted between
David Jones
boss
Paul Zahra
and his predecessor,
Mark McInnes
, over who was to blame for the retailer’s underperformance.

While the industry faces some ferocious headwinds in the form of weak consumer sentiment and higher household savings, it is still having difficulty admitting that some of the problems are of its own making.

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The influx of international competition and the online boom make it difficult to compete, but this should be an opportunity to lift their game and bring Australian retail into the 21st century.

Retailers have been complaining all year that they are disadvantaged because the goods and services tax is not charged for online purchases under $1000. The Productivity Commission’s report found online retailing represented just 6 per cent of total Australian retail sales, which admittedly seems low based on anecdotal evidence.

Online giant eBay says up to 1.6 million people in Australia are likely to log on to its site this Sunday, making it one of the busiest online shopping days in the nation’s history.

The commission says there is an argument to reduce the threshold, but the government should only do so if it is cost-effective. Everyone knew from the draft report released in August that this was not the case.

If the threshold fell to, say $100, the government would be $700 million out of pocket because the cost of administrating the tax outweighs the additional revenue.

This offers Canberra a good excuse for not lowering the threshold.

Labor is in a bit of a bind, however. It knows the Australian public love being able to buy cheaper goods online, but must stack this up against the possibility that some retailers may collapse and jobs will be lost.

The National Retailers Association estimates up to 10 per cent of the retail market will go offshore if the playing field does not become more level. This would equate to 50,000 jobs and $2 billion in lost wages.

The other setback for the retail industry on Friday was the government’s response to industrial relations issues dogging the sector.

While some retailers would like penalty rates abolished, the peak retail bodies are focused on getting more flexibility on the timing of shifts and restrictive trading hours.

Assistant Treasurer
Bill Shorten
was keen on Friday to talk about wages when he said the government would not take the “low road" on industrial relations.

But he did not shed much light on other structural issues that are the real problem for the retail industry as it seeks changes to the Fair Work Act.

The government rejected a recommendation that retail trading hours should be fully deregulated in all states, saying it remained the responsibility of state and territory governments.

While the government and unions are keen to give the impression that retailers want penalty rates slashed, the Australian Retailers Association says it accepts overtime rates should apply.

But Shorten was correct when he said scrapping penalty rates in an already relatively underpaid industry was not the answer.

Service standards in Australian retail are already below par compared with many Western countries, and cutting wages will only make the bricks and mortar shopping experience even more unpleasant and send more consumers online.

The government also established a retail council, which will be chaired by Shorten – a former union leader – to advise the government on the future of the industry, a move welcomed by groups such as the Australian Retailers Association (not surprisingly as it has a seat on the body).

Taskforces and advisory councils are not the immediate solution to the sea of red tape and inflexible workplace rules that the industry is battling, but they offer some hope of addressing the mess without introducing a costly tax change that panders to retailers’ regret that the internet was ever invented.

Fletcher Jones’s demise has been on the cards for years and may be a wake-up call for retailers that fail to respond quickly to changing times.

The long-running saga that is
Telstra
’s efforts to finalise its $11 billion national broadband network deal has been hit by another delay, but it’s far from fatal.

While the deal will miss the December 20 deadline, now putting it about nine months behind the original schedule, the Australian Competition and Consumer Commission is expected to make its decision in February. The commission’s comment that it was “minded" to accept Telstra’s undertaking if the telecoms group could address concerns about ADSL should be taken as a positive.

Lachlan Murdoch
was frank when he took to the stage at
Ten Network
’s annual shareholder meeting on Friday.

“The business was stuffed," he said when describing the media company, which was sinking in soaring costs, a ratings slide and soft advertising markets when he took the helm a year ago.

Murdoch paced the stage as usual, waxing lyrical about Ten’s efforts to win back its core youthful demographic with offerings like Young Talent Time.

He of course ignored the elephant in the room. The not so young but perhaps talented
Kerry Stokes
is now lurking in the wings with a 2.1 per cent stake in the television and outdoor advertising group.

News that Stokes, who controls
Seven Group Holdings
, is on the Ten register took the market by surprise and adds to an already mogul-heavy and constantly revolving shareholder register at Ten that includes
James Packer
and
Gina Rinehart
.

While Stokes cannot own more than 14.9 per cent of Ten under media ownership laws and cannot sit on the board, his presence is another distraction for a company haunted by the sparring egos of media barons.

It could be interpreted as a vote of confidence in Ten, which is showing promising signs that it may be able to win back some of the market share it has lost to Seven’s ratings blitz.

However, it is more likely just a bit of mischief on Stokes’s part as he seeks to annoy Murdoch.